The 50/30/20 Payroll Rule for PT, OT and SLP Practices
Payroll is one of the three main profit margin levers in a private practice. It's also the one most owners track the least precisely. Most owners look at total payroll, if they look at it at all. Will Humphreys, founder and Chief Rockstar of Rockstar, uses a framework that splits it into two numbers. Each one gets tracked on its own, every pay period.
Start with one number: 50%
Total payroll should be no more than 50% of gross income.
That's the ceiling for everything you pay your team, clinical and administrative combined.
Then split it in two: 30% and 20%
Clinical payroll: 30% of gross income, maximum
Administrative payroll: 20% of gross income, maximum
The blended total can look fine while one side runs over. A practice at 50% total payroll could be at 25% clinical and 25% admin. The total hits the target, but admin is 5 points over.
Tracking the two numbers separately shows you where the money is going.
Run your own numbers
Use your last 12 months of gross income and payroll.
Formula | Your numbers | |
Gross income (last 12 months) | From your financial reports | |
Total payroll target | Gross income × 0.50 | |
Clinical payroll target | Gross income × 0.30 | |
Admin payroll target | Gross income × 0.20 | |
Your actual clinical payroll | From your payroll reports | |
Your actual admin payroll | From your payroll reports | |
Clinical over or under target | Actual clinical − clinical target | |
Admin over or under target | Actual admin − admin target |
On $1 million in gross income, every percentage point over target is $10,000 a year.
Example practice: what 15 points costs on $1 million
The numbers below are an example practice, not a real client.
This example practice brings in $1 million in gross income. Total payroll is 65%, split 35% clinical and 30% admin. Profit margin is 10%.
Bringing payroll in line with 50/30/20 on the same $1 million in revenue puts $150,000 back on the bottom line. Profit margin goes from 10% to 25%.
Example practice | Before | After |
Gross income | $1,000,000 | $1,000,000 |
Clinical payroll | $350,000 (35%) | $300,000 (30%) |
Admin payroll | $300,000 (30%) | $200,000 (20%) |
Total payroll | $650,000 (65%) | $500,000 (50%) |
Other operating expenses | $250,000 (25%) | $250,000 (25%) |
Profit | $100,000 (10%) | $250,000 (25%) |
Revenue doesn’t change in this example, and neither does the clinical team. The $150,000 comes from admin payroll alone.
When admin runs over 20%
Common reasons admin payroll runs over:
Clinicians and owners are doing admin work at clinical pay rates
Admin roles grew task by task without a plan, so the work is spread across more people than it needs
Roles were hired for "help with admin" instead of a defined set of tasks and hours
The fix is role design and the right hire. Start by finding out where admin hours actually go. Our post Your Highest-Paid People Are Doing Your Lowest-Value Work walks through a two-week audit.
Then group the movable tasks into defined roles, with the tasks, hours, systems, and skills each one needs, and hire for that role.
How Rockstar helps
Rockstar designs the role with you before we search. We look at the admin work your team is carrying, then find the VA who already has that experience.
Rockstar places vetted, highly experienced VAs in front desk, insurance verification and authorization, medical billing, administrative, credentialing, and social media roles. You manage your VA day-to-day. Rockstar handles payroll, benefits, and replacements.
Frequently asked questions
What percentage of revenue should payroll be in a PT practice? Under the 50/30/20 rule, total payroll should be no more than 50% of gross income: 30% clinical and 20% administrative, maximum.
Does the 50/30/20 rule apply to OT and SLP practices?
Yes. The framework applies to PT, OT, and SLP private practices.
Why track clinical and admin payroll separately?
The blended total can hit 50% while one side runs over. Tracking them separately shows which side to fix.
What should I do if clinical payroll is over 30%?
Clinical payroll is a separate lever from admin payroll. This post focuses on admin, where role design and hiring are the main fix.
Find your profit leaks
Put your own numbers into the Profit Leak Calculator and see where your margin is going.
